Western Digital loses drive as profits dry up

Western Digital is in trouble even after announcing that its first-quarter profit was better than Wall Street’s gloomy expectations.

The maker of hard drives had been expected to announce that things would get a little better in the coming quarter, but it looks like its tarot card readers did not think this was likely.

To be fair it is not doing that badly given the economic circumstances, but Wall Street seems to think it should be doing much better.

Instead the company said that slowing PC sales and falling IT spending would hurt current-quarter sales and eat into margins like a hungry swarm of mosquitoes.

It is not clear why Western Digital is doing so badly. Its storage devices are a key part of the move to the cloud and data centres. Indeed, some think that the company’s problems were hidden thanks to the strong growth this business.

Western Digital did flag a weakness in its enterprise business last month when it lowered its revenue outlook.

Outgoing Chief Executive John Coyne told Reuters that economic uncertainty was taking a toll on IT spending and there were elections, changes in government, fiscal cliffs and all sorts of bad stuff which is impacting spending at a corporate and a consumer level.

Windows 8, Microsoft’s latest operating system scheduled to be launched this Friday, was expected to boost PC sales. However that is starting to look like it might be a false hope as even Intel does not think it will make much odds.

Western Digital said it expects second-quarter sales of between $3.55 billion and $3.7 billion.

The company expects second-quarter adjusted gross margins of 28 percent, below its long-term target of 30 percent.

First-quarter net profit more than doubled to $519 million thanks to the company’s acquisition of Hitachi’s hard-disk drive business earlier this year.